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Egypt, IMF in initial agreement on next aid tranche

© AFP/File | The International Monetary Fund head of delegation for Egypt, Chris Jarvis (L) and Egypt?s Minister of Finance Amr al-Garhy attend a joint press conference in Cairo on August 11, 2016

CAIRO (AFP) - 

The International Monetary Fund said Friday it will release the second tranche of a $12-billion loan to Egypt, in a "vote of confidence" in the country's economic reform programme.

The amount of $1.25 billion must still be endorsed by the IMF board following an "expert-level agreement" announced after a visit to Cairo, an IMF statement said.

According to Egypt's finance minister, Amr al-Garhy, the tranche should be disbursed in the second half of June.

"This agreement is a vote of confidence by the IMF staff in the continued implementation of the Egyptian authorities' programme" on economic reform, the IMF statement said.

Ratings agency Standard and Poor's in a statement said it anticipated "ongoing fiscal consolidation in Egypt over 2017-2020, supported by the three-year IMF programme".

S&P "affirmed its 'B-/B' long- and short-term foreign and local currency sovereign credit ratings on Egypt".

"The outlook is stable," its statement said.

Since the 2011 revolt against Hosni Mubarak, the Arab world's most populous country has seen a sharp decline in tourism revenue and reduced foreign investment, caused by political instability and security issues.

In November last year, the IMF approved the $12-billion three-year aid package for Egypt, at the time releasing an initial $2.75 billion.

To obtain the IMF lifeline, Cairo undertook to implement drastic reforms, adopting value added tax, cutting public energy subsidies and in November floated the exchange rate of the Egyptian pound.

Before November, the official rate was 8.83 Egyptian pounds to the US dollar, but it has since weakened and on Friday was averaging 18 pounds per dollar, according to the Central Bank's website.

Friday's IMF announcement comes after a visit to Cairo by a delegation charged with reviewing Egypt's economic reform programme, its statement said.

"This agreement is a vote of confidence by the IMF staff in the continued implementation of the Egyptian authorities' programme," the statement said.

"Foreign exchange shortages are resolved and interbank market activity is recovering. Egypt has regained investors' confidence," it said.

© 2017 AFP